“For if a person shifts their caution to their own reasoned choices and the acts of those choices, they will at the same time gain the will to avoid, but if they shift their caution away from their own reasoned choices to things not under their control, seeking to avoid what is controlled by others, they will then be agitated, fearful, and unstable.” —EPICTETUS

...Epictetus is reminding you that serenity and stability are results of your choices and judgment, not your environment. If you seek to avoid all disruptions to tranquility—other people, external events, stress—you will never be successful. Your problems will follow you wherever you run and hide. But if you seek to avoid the harmful and disruptive judgments that cause those problems, then you will be stable and steady wherever you happen to be.

How do so many ineffective and even dangerous drugs make it to market? One reason is that clinical trials are often run on "dream patients" who aren't representative of a larger population. On the other hand, sometimes the only thing worse than being excluded from a drug trial is being included.

Brain Pickings: Tim Ferriss on How He Survived Suicidal Depression and His Tools for Warding Off the Darkness (LINK)

The number of publicly traded U.S. companies peaked in 1996 at 7,322. Today there are just over 3,700, according to Wilshire Associates. The U.S. population has risen nearly 50% since 1975, and real GDP has tripled. But the number of public companies has declined 21%.

Understanding why this happening, how we got here, and what we can do about it is an important topic we wanted to tackle. So we put together a report.

Michael Lewis on CNBC (Video 1, Video 2) [Lewis' comment about Amos Tversky's advice for people to get out of anything they don't want to be doing: "[Tversky] said don't worry about making up an excuse for not being there. Just get up and start walking, and it's amazing how quickly your mind will formulate the words as to why you have to leave."]

Two of the world’s most important stock markets have a big new investor—the state.

About 30% of all the companies in Japan’s three main equity indexes now count the country’s central bank as one of their top 10 shareholders, according to a Wall Street Journal analysis of data as of the end of September. Six years ago, the Bank of Japan’s presence in the market was trivial.

In China, two major state-owned investment funds that are part of the so-called national team have become top 10 shareholders in 39% of listed companies over the past year, according to UBS, which analyzed shareholdings as of the end of September.

Some nice thoughts about reading in a Tweetstorm from Patrick O’Shaughnessy (LINK)

For Kindle readers, I just noticed that some of the books that Charlie Munger has recommended have been made available in Kindle format over the last few years, such as: Models of My Life, Ice Age, and A Matter of Degrees.

Friday, December 2, 2016

When investors do not demand compensation for bearing illiquidity, they almost always come to regret it.

Most of the time liquidity is not of great importance in managing a long-term-oriented investment portfolio. Few investors require a completely liquid portfolio that could be turned rapidly into cash. However, unexpected liquidity needs do occur. Because the opportunity cost of illiquidity is high, no investment portfolio should be completely illiquid either. Most portfolios should maintain a balance, opting for greater illiquidity when the market compensates investors well for bearing it.

A mitigating factor in the tradeoff between return and liquidity is duration. While you must always be well paid to sacrifice liquidity, the required compensation depends on how long you will be illiquid. Ten or twenty years of illiquidity is far riskier than one or two months; in effect, the short duration of an investment itself serves as a source of liquidity.

...In times of general market stability the liquidity of a security or class of securities can appear high. In truth liquidity is closely correlated with investment fashion. During a market panic the liquidity that seemed miles wide in the course of an upswing may turn out only to have been inches deep. Some securities that traded in high volume when they were in favor may hardly trade at all when they go out of vogue.

When your portfolio is completely in cash, there is no risk of loss. There is also, however, no possibility of earning a high return. The tension between earning a high return, on the one hand, and avoiding risk, on the other, can run high. The appropriate balance between illiquidity and liquidity, between seeking return and limiting risk, is never easy to determine.

The Distance is a podcast by Basecamp about longevity in business, featuring the stories of businesses that have endured for at least 25 years and the people who got them there.

Freakonomics Radio (podcast) -- Bad Medicine, Part 1: The Story of 98.6 (LINK)

We tend to think of medicine as a science, but for most of human history it has been scientific-ish at best. In the first episode of a three-part series, we look at the grotesque mistakes produced by centuries of trial-and-error, and ask whether the new era of evidence-based medicine is the solution.

Brain Pickings -- Genes and the Holy G: Siddhartha Mukherjee on the Dark Cultural History of IQ and Why We Can’t Measure Intelligence (LINK)

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About VIW

Value Investing World is a blog dedicated to promoting the multidisciplinary approach to investing and development of – as Charlie Munger describes it – a latticework of mental models. Although largely focused on linking to investing and economic material it deems of interest, it will also post and link to material from other disciplines that it thinks worth reading or watching, and will occasionally post investment ideas that it thinks are worthy of either investment or further investigation.

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This website is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services by Boyles Asset Management, LLC ("BAM") or any other entities related to or owned by BAM. No reference to any specific security constitutes a recommendation to buy, sell or hold that security or any other security. Nothing on this website shall be considered a solicitation or offer to buy or sell any security, future, option or other financial instrument or to offer or provide any investment advice or service to any person in any jurisdiction. Nothing contained on the website constitutes investment advice or offers any opinion with respect to the suitability of any security, and the views expressed on this website should not be taken as advice to buy, sell or hold any security. In preparing the information contained in this website, I have not taken into account the investment needs, objectives and financial circumstances of any particular investor. This information has no regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this information and investments discussed may not be suitable for all investors. Any views expressed on this website by me were prepared based upon the information available to me at the time such views were written. Changed or additional information could cause such views to change. All information is subject to possible correction. Information may quickly become unreliable for various reasons, including changes in market conditions or economic circumstances.